Professional Documents
Culture Documents
EXECUTIVE SUMMARY
G reetings from Zycus! We are delighted to introduce our first ever Zycus P2P Benchmark study in which we document dozens of key performance
indicators relating to corporate processes and technologies for managing indirect spending. More than 450 procurement organizations worldwide
participated in the study. Rather than segmenting procurement teams into performance classes — as many other benchmarking studies attempt to do —
our objective was to paint a complete and realistic global landscape of where procurement organizations stand on a broad array of indirect spending and
procure-to-pay (P2P) process performance metrics. Our primary intent with this research is to provide procurement leaders with an understanding of
where their organizations fit competitively, where they may wish to focus more and how they might progress on metrics that are most relevant to their
organizational objectives. The study results paint a sobering — yet hopeful — view of procurement's progress in documenting, categorizing, analyzing,
influencing, controlling and ultimately reducing corporate indirect spending. Some key findings:
n O
n average worldwide, some 60% of corporate indirect spending is now being addressed by some type of controlled P2P workstream
(RFQ/PO/invoice VS. invoice only). One in four companies report that some 80%-100% of indirect spending now flows through a controlled P2P
workstream. This builds a strong foundation for systematically capturing the data needed to fuel advanced analytics, which, in turn enable strategic
procurement teams to evaluate markets and supplier proposals strategically, decide where and how to award business and negotiate competitive
commercial terms and service-level agreements (SLAs) with suppliers of indirect goods and services.
n D
espite relatively strong rates of indirect spend now flowing through controlled P2P workstreams, many companies still appear to be struggling
with the transition from better transaction documentation to consistently generating actionable analytics for procurement. The study finds,
for example, that only 45% of total indirect spend, on average, is currently being classified to a sufficient level of detail to enable spend analytics
that procurement professionals would classify as 'actionable', meaning theyb believe that they could reliably deploy the intelligence within decision
making processes, in negotiations with suppliers, in budgeting, forecasting activities and so forth. At the same time, one-third of companies report
being above the average (either 61-80% or 81-100%) on this metric, indicating that there are tools in the marketplace today that can generate fully
actionable analytics for indirect spending categories.
n E
ven when they do have actionable analytics for indirect spending, enterprise procurement organizations appear to be still challenged with other
obstacles (for example, lack of resources, expertise, technology systems, corporate politics, etc) to placing more indirect spending categories
under management by procurement. On average, study participants estimate that only 40% of total indirect spending is currently considered
addressable by procurement, while nearly one-third estimate the figure much lower in the 0-20% range. Nonetheless, one in four procurement
organizations place themselves into the top two performance tiers (61-80% or 81-100%), signifying that, with perseverance, such obstacles can be
overcome.
n E
ven when procurement is addressing or directly managing indirect spend categories, there are still other challenges to overcome as various
n W
hile P2P process control and automation technology has been around for quite some time — since the middle to late 1990s — the study also finds
surprisingly little progress, to date, on key performance metrics that one might have expected to advance more substantially — for example
in PO and invoice processing costs, P2P process cycle times and so forth. This may reflect known weaknesses in first-generation P2P solutions as
well as implementation and adoption challenges, which companies are beginning to address by upgrading to next-generation P2P solutions. Next-
generation P2P solutions are typically more consumer-like, more flexible in terms of workflow and less reliant on things such as e-catalogs, which
introduce their own sets of challenges, bottlenecks and costs and are not particularly amendable to handling complex indirect spending categories.
We hope you find the report instructive and useful for informing your own P2P process-improvement journey going forward.
Sincerely,
The Zycus Team
37% 41%
40% 35% 40% 40%
30% 27%
23% 21%
20% 20% 18% 20% 16%
12% 12% 12% 12%
4%
0% 0% 0%
>3 bil 100 mil <100 N/A or 0-100 100- 500 >1bil N/A CPO Dir Mgr PA or Admin
to 3 bil mil private mil 500 mil to VP buyer
mil 1 bil Exec
50%
30% 26%
25% 15% 19%
10%
0%
0-20% 21-40% 41-60% 61-80% 81-100%
50%
50%
31%
23% 21% 20%
25%
5%
0%
0-20% 21-40% 41-60% 61-80% 81-100%
50%
26% 29% 24%
25% 15%
6%
0%
0-20% 21-40% 41-60% 61-80% 81-100%
50%
26% 23% 21%
25% 16% 14%
0%
0-20% 21-40% 41-60% 61-80% 81-100%
50%
50%
Organic
n 4
0% relying on procurement modules offered by their
ERP providers, P2P sol’ns 24%
n 7
% having developed custom P2P solutions in house, and
n 2
4% having invested in applications built from the
ground up and engineered specifically for procurement
(versus financial or operations perspectives). For sake
of simplicity, we shall refer to this group as 'organic P2P
ERP modules 40%
solutions' throughout our report.
Other 5%
57%
The large gap speaks to persistent difficulties in first-generation P2P technologies with
driving to reasonable speed and efficiency in managing supplier catalogs and coping
with substantial differences among various types of indirect spending. For example,
automating requisitions, approvals and payments for contingent workers presents a
very different set of challenges compared to office or MRO supplies. Of note, however,
is that companies that have implemented P2P technology as part of larger integrated
procurement suite deployments score substantially higher on this metric, addressing
some 55% of indirect spending, on average, within their P2P systems. This suggests that
integration capabilities should be a key selection criteria for companies that are either
investing in P2P for the first time or considering upgrades to next-generation P2P solutions.
vs. being
addressed now
100%
75%
Percent of indirect spending considered capable of being
addressed by P2P technology. Weighted avg: 57%
40%
50%
30%
25% 22% 17% 18% 13%
0%
0-20% 21-40% 41-60% 61-80% 81-100%
52%
e-catalogs. Or companies failed to achieve the critical mass of e-catalogs needed to encourage sufficient
adoption, institutional learning and routine use of their P2P technology. While solutions have cropped
up to automate and make e-catalog creation and management processes more efficient, the Zycus
P2P Benchmark still finds widely varying degrees of progress toward more extensive use of e-catalogs
within P2P systems. Overall, the average ratio of on- to off-catalog transactions stands right around
50:50. This belies, however, a broad distribution in the underlying detail as shown below.
48%
resources and effort on making e-catalog processes faster and more efficient. As long as non-
catalog transactions can be captured and managed just as effectively as catalog transactions,
there may no longer be a need to invest heavily in improving e-catalog creation and management
processes.
100%
On- to off-catalog percentage splits for requisitions flowing
through P2P technology solutions
75%
50%
25%
13% 17% 14% 11%
7% 7% 7% 9% 6% 9%
0%
Less 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10
59%
on- to off-contract transaction ratios. By this view, some 47% of companies stand above the baseline
split with one third reporting 80% or more of transactions being on-contract.
41%
guiding a requisitioner to purchase from a preferred contract supplier (even when e-catalogs are
not feasible) or of promptly escalating requirements needing intervention by trained procurement
professionals.
100%
On- to off-contract percentage splits for requisitions flowing
through P2P technology solutions
75%
50%
24%
25%
12% 12% 16% 11% 12%
6%
0% 4% 3%
0%
Less 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10
81%
Zycus P2P Benchmark places the average match rate at 81% of invoices flowing through
P2P solutions. Some 44% of procurement teams with P2P technology deployed report
matching somewhere above 90% of invoices to POs and quite a large number within that
group report 100% matching.
100%
Matched/not-matched-to-PO splits for invoices flowing
19%
through P2P technology solutions
75%
50% 44%
31%
25%
3% 3% 8% 9%
0% 1% 1% 0%
0%
Less 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10
The key to moving the meter on these metrics often comes down to a P2P system's capabilities for classification: how good is the system at recognizing
what a user wishes to buy, classifying the need correctly and bringing all the ensuing information field requirements, approval workflows and so forth to
bear in completing the transaction?
BEST
Wtd Avg 40% or less 41-60% 61%-plus
47%
wants to supply, you probably will not succeed with mandating just one way in which
suppliers can submit invoices for payment, especially if your selection carries fees or
other additional costs for suppliers. Prepare to accommodate a full range of options
from the very smallest mom & pop suppliers all the way up to the most massive of
global corporations.
n C
onsider offering savings-sharing incentives for digital invoice submission such as
shorter standard payment terms and digital payment options that also help to cut
suppliers' processing costs.
50%
30%
25% 22% 17% 18% 13%
0%
0-20% 21-40% 41-60% 61-80% 81-100%
Because our study was global, we asked participants to express costs in whatever unit of currency would apply to them. As such, the charts on this page
and next, which express overall global results, should be interpreted with caution. However, as the vast majority of study participants are located in
advanced, industrialized economies (the U.S., Canada, Western Europe, Australia/New Zealand and so forth), isolating for various regions and countries
produces remarkably little variation in the results. U.S./Canada shows virtually no variation from the overall global average for cost to issue a PO; Europe
averages slightly lower at 18.7, while Australia/New Zealand comes in somewhat higher at 24-25.
19.7
100%
80%
60%
Average cost to
40% 33% write a PO
16%
20% 12% 8% 9% 10% 12%
0%
0-5 5-10 10-15 15-20 20-25 25-30 30+
18.5
n F
ocus first on improving the various metrics detailed on page 20 of this
report. Corrections and rework of financial documentation add zero — or
even negative value — and make up a large share of overall processing costs.
n I
mprove and accelerate item search and selection capabilities and, where
100%
process an invoice — for example, by prefilling required information
fields or offering dropdown choices both to
control and accelerate data entry in transaction
processing.
80%
60%
40%
26%
18%
20%
10% 11% 15% 10% 10%
0%
0-5 5-10 10-15 15-20 20-25 25-30 30+
The challenges of creating and maintaining accurate and thorough supplier e-catalogs has long been an Achilles heel for P2P technology; benchmark
study results suggest this remains a persistent pain point. Indeed, when asked to cite specific functionality wish lists for P2P technology, procurement
professionals often cite things like:
BEST
Requisition-to-order cycle times in days
Wtd Avg 30+ days 6-30 days 0-5 days
Simple 4.6 days 3% 16% 81%
53%
group. That approach, however, can yield its own set process bottlenecks (sick leave, vacation,
etc), leading to stakeholder dissatisfaction and frustration when people are faced with having to
re-learn processes — typically under time pressure — because they practice them only rarely.
75%
Percent of targeted end users who have adopted
P2P solutions
47%
50%
0%
0-20% 21-40% 41-60% 61-80% 81-100%
Weighted Avg
Rating 1-10
scale (10=best)
Ease of learning 6.2
Semi-mandatory
6.0
47%
Availability of support 6.5
n S
trong yet highly flexible and adaptable
User validation 26%
workflow capabilities
n Simplicity and ease of use
State-of-the-art functionality 17%
Behind every Zycus solution stands an organization that possesses deep, detailed procurement expertise and a sharp focus on being responsive to
customers. We are a large — 600+ and growing — company with a physical presence in virtually every major region of the globe. We see each customer
as a partner in innovation and no client is too small to deserve our attention. With more than 200 solution deployments among Global 1000 clients, we
search the world continually for procurement practices proven to drive competitive business performance. We incorporate these practices into easy-to-
use solutions that give procurement teams the power to get moving quickly — from any point of departure — and to
continue innovating and pushing business and procurement performance to new heights.
UNITED STATES
103 Carnegie Center, Suite 201, Princeton NJ 08540
609 799 5664
UNITED KINGDOM
Office No 104, 400 Thames Valley Park Drive, Thames Valley Park
Reading, Berkshire, RG6 1PT
+44 (0) 1189 637 493
INDIA
Plot No. GJ - 07, Seepz++, Seepz SEZ, Andheri (East), Mumbai 400 096
+91 22 66407676
AUSTRALIA
Level 9, 440 Collins Street, Melbourne VIC 3000
+61 03 8679 6562